Infrastructure Financing Does Fall Within The Scope of European Union State Aid Rules

The Court of Justice of the European Union (CJEU) has confirmed that the financing of infrastructure projects is subject to the European State aid rules. The judgment concerns the financing of airport infrastructure, but the underlying legal point extends far beyond this sector. Repercussions can be expected for all companies that build, maintain and operate infrastructure with public support.

EU State aid law prohibits all funding, granted in any form whatsoever, that benefits a specific company or group of companies. These rules apply to both public and private entities. State aid may only be approved by the European Commission under certain circumstances, after notification by the Member State. If the State support that qualifies as State aid is handed out without approval by the Commission, the Commission will order the Member State to recover the aid from the companies that have benefitted.

The closing in of EU State aid law on infrastructure financing has been a gradual development over the last few years. The Commission has been slowly shifting its view. At first, the European State aid rules were deemed to be non applicable per-se, meaning, generally, infrastructure measures could be funded by EU Member States without State aid law being applicable. In recent years, however, not only have the use and operation of infrastructure been considered to constitute an economic activity (and therefore fall within the scope of the State aid regime) but the financing of infrastructure has also attracted the attention of the Commission.

In the case subject to the judgment decided by the CJEU yesterday (Case C-288/11P), a German airport had notified to the Commission of measures that included the financing of the construction of a new runway. The Commission considered that the financing of the runway did amount to State aid but it approved the measure eventually. The decision was appealed on the grounds that the financing of such infrastructure does not fall within the scope of the State aid rules.

The CJEU upheld the Commission’s decision and the judgment of the General Court of the EU (see Case T- 443/08). The CJEU held that the construction of airport infrastructure is a precondition for the operation of an airport and is therefore interlinked in a way that warrants the application of the State aid rules to the financing of its construction, as well as to its use and operation. The judgment concerns airport infrastructure, but the underlying legal point extends well beyond the airport sector. It is relevant to all types of infrastructure where its operation can be considered to amount to an economic activity, such as, for example, the operation of ports or sports arenas.

The implications of this judgment for companies and government authorities are substantial, not only with respect to future projects, but also in relation to all projects that commenced within the last 10 years. As a result, public authorities, companies that have benefitted from public funding of infrastructure projects and their competitors, should review whether the financing of these infrastructure projects qualifies as State aid and, if so, how this situation could be remedied.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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